Mrkt 341 Exam #3

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Price

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The amount of money charged for a product or service, or the sum of all the values that customers give up in order to gain the benefits of having or using a product or service.

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Value-based pricing

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Setting price based on buyers' perceptions of value rather than on the seller's cost.

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Good-value pricing

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Offering just the right combination of quality and good service at a fair price.

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Value-added pricing

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Attaching value-added features and services to differentiate a market offering and support higher prices, rather than cutting prices to match competitors.

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Cost-based pricing

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Setting prices based on the costs for producing, distributing, and selling the product plus a fair rate of return for its effort and risk.

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Fixed costs

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Costs that do not vary with production or sales level.

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Variable costs

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Costs that vary directly with the level of production.

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Total costs

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The sum of the fixed and variable costs for any given level of production.

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Cost-plus pricing

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Adding a standard markup to the cost of the product.

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Break-even pricing (target profit pricing)

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Setting price to break even on the costs of making and marketing a product; or setting price to make a target profit.

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Target costing

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Pricing that starts with an ideal selling price, then targets costs that will ensure that the price is met.

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Demand curve

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A curve that shows the number of units the market will buy in a given time period, at different prices that might be charged.

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Price elasticity

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A measure of the sensitivity of demand to changes in price.

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Market-skimming pricing (price skimming)

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Setting a high price for a new product to skim maximum revenues layer by layer from the segments willing to pay the high price; the company makes fewer but more profitable sales.

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Market-penetration pricing

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Setting a low price for a new product in order to attract a large number of buyers and a large market share.

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Product line pricing

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Setting the price steps between products in a product line based on cost differences and customer perceptions of the value.

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Optional-product pricing

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The pricing of optional or accessory products along with a main product.

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Captive-product pricing

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Setting a price for products that must be used along with a main product.

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By-product pricing

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Setting a price for by-products in order to make the main product's price more competitive.

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Product bundle pricing

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Combining several products and offering the bundle at a reduced price.

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Discount

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A straight reduction in price on purchases under stated conditions or during a stated period of time.

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Allowance

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Promotional money paid by manufacturers to retailers in return for an agreement to feature the manufacturer's products in some way.

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Segmented pricing

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Selling a product or service at two or more prices, where the difference in prices is not based on differences in cost.

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Psychological pricing

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A pricing approach that considers the psychology of prices and not simply the economics; the price is used to say something about the product.

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Reference prices

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Prices that buyers carry in their minds and refer to when they look at a given product.

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Promotional pricing

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Temporarily pricing products below the list price, and sometime even below cost, to increase short-run sales.

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Geographical pricing

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Setting price based on the buyer's geographic location.

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Dynamic pricing

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Adjusting prices continually to meet the characteristics and needs of individual customers and situations.

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Value delivery network

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The network made up of the company, suppliers, distributors, and ultimately customers who "partner" with each other to improve the performance of the entire system in delivering customer value.

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Marketing channel (distribution channel)

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A set of interdependent organizations that help make a product or service available for use or consumption by the consumer or business user.

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Channel level

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A layer of intermediaries that performs some work in brining the product and its ownership closer to the final buyer.

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Direct marketing channel

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A marketing channel that has no intermediary levels.

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Indirect marketing channel

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A channel containing one or more intermediary levels.

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Channel conflict

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Disagreement among marketing channel members on goals and roles - who should do what and for what rewards.

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Conventional distribution channel

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A channel consisting of one or more independent producers, wholesalers, and retailers, each a separate business seeking to maximize its own profits even at the expense of profits for the system as a whole.

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Vertical marketing system (VMS)

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A distribution channel structure in which producers, wholesalers, and retailers act as a unified system. One channel member owns the others, has contracts with them, or has so much power that they all cooperate.

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Corporate VMS

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A vertical marketing system that combines successive stages of production and distribution under single ownership - channel leadership is established through common ownership.

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Contractual VMS

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A vertical marketing system in which independent firms at different levels of production and distribution join together through contracts to obtain more economies or sales impact than they could achieve alone.

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Franchise organization

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A contractual vertical marketing system in which a channel member, called a franchiser, links several stages in the production-distribution process.

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Administered VMS

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A vertical marketing system that coordinates successive stages of production and distribution, not through common ownership or contractual ties, but through the size and power of one of the parties.

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Horizontal marketing system

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A channel arrangement in which two or more companies at one level join together to follow a new marketing opportunity

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Multichannel distribution system

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A distribution system in which a single firm sets up two or more marketing channels to reach one or more customer segments.

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Disintermediation

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The cutting out of marketing channel intermediaries by product or service producers, or the displacement of traditional resellers by radical new types of intermediaries.

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Marketing channel distribution

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Designing effective marketing channels by analyzing consumer needs, setting channel objectives, identifying major channel alternatives, and evaluating them.

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Intensive distribution

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Stocking the product in as many outlets as possible.

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Exclusive distribution

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Giving a limited number of dealers the exclusive right to distribute the company's products in their territories.

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Selective distribution

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The use of more than one, but fewer than all, of the intermediaries who are willing to carry the company's products.

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Marketing channel management

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Selecting, managing, and motivating individual channel members and evaluating their performance over time.

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Marketing logistics (physical distribution)

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Planning, implementing, and controlling the physical flow of materials, final goods, and related information from points of origin to points of consumption to meet customer requirements at a profit.

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Supply chain management

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Managin upstream and downstream value-added flows of materials, final goods, and related information among suppliers, the company, resellers, and final consumers.

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Distribution center

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A large, highly automated warehouse designed to receive goods from various plants and suppliers, take orders, fill them efficiently, and deliver goods to customers as quickly as possible.

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Intermodal transportation

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Combing two or more modes of transportation.

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Integrated logistics management

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The logistics concept that emphasizes teamwork, both inside the company and among all the marketing channel organizations, to maximize the performance of the entire distribution system

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Third-party logistics (3PL) provider

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An independent logistics provider that performs any or all of the functions required to get its client's product to market.

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Retailing

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All activities involved in selling goods or services directly to final consumer for their personal, nonbusiness use.

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Retailer

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A business whose sales come primarily from retailing.

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Specialty store

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A retail store that carries a narrow product line with a deep assortment within that line.

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Department store

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A retail organization that carries a wide variet of product lines - each line is operated as a separated department managed by specialist buyers or merchandiser.

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Supermarket

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A large, low-cost, low-margin, high-volume, self-service store that carries a wide variety of grocery and household products.

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Convenience store

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A small store, located near a residential area, that is open long hours seven days a week and carries a limited line of high-turnover convenience goods.

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Superstore

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A store much larger than regular supermarket that offers a large assortment of routinely purchased food products, nonfood items and services.

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Category killer

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Giant specialty store that carries a very deep assortment of a particular line and is staffed by knowledgeable employees.

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Service retailer

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A retailer whose product line is actually a service, including hotels, airlines, banks, colleges, and many others.

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Discount store

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A retail operation that sells standard merchandise at lower prices by accepting lower margins and selling at higher volume.

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Off-price retailer

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Retailer that buys at less-than-regular wholesale prices and sells at less than retail. Examples are factory outlets, independents, and warehouse clubs.

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Independent off-price retailer

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Off-price retailer that is either independently owned and run or is a division of a larger retail corporation.

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Factory outlet

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Off-price retailing operation that is owned and operated by a manufacturer and that normally carries the manufacturer's surplus, discontinued, or irregular goods.

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Warehouse club

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Off-price retailer that sells a limited selection of brand name grocery items, appliances, clothing, and a hodgepodge of other goods at deep discounts to members who pay annual membership fees.

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Chain stores

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Two or more outlets that are commonly owned and controlled.

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Franchise

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A contractual association between a manufacturer, wholesaler, or service organization (a franchiser) and independent businesspeople (franchisees) who buy the right to own and operate one or more units in the franchise system.

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Shopping center

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A group of retail businesses planned, developed, owned, and managed as a unit.

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Wheel-of-retailing concept

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A concept that states that new types of retailers usually begin as low-margin, low-price, low-status operations but later evolve into higher-priced, higher-service operations, eventually becoming like the conventional retailers they replaced.

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Wholesaling

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All activities involved in selling goods and services to those buying for resale or business use.

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Wholesaler

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A firm engaged primarily in wholesaling activities.

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Merchant wholesaler

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Independently owned business that takes title to the merchandise it handles.

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Broker

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A wholesaler who does not take title to goods and whose function is to bring buyers and sellers together and assist in negotiation.

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Agent

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A wholesaler who represents buyers or sellers on a relatively permanent basis, performs only a few functions, and does not take title to goods.

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Manufacturers' sales branches and offices

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Wholesaling by sellers or buyers themselves rather than through independent wholesalers.

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Promotional mix (marketing communications mix)

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The specific blend of advertising, public relations, personal selling, sales promotion, and direct-marketing tools that the company uses to persuasively communicate customer value and build customer relationships.

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Advertising

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Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor.

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Sales promotion

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Short-term incentives to encourage the purchase or sale of a product or service.

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Personal selling

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Personal presentation by the firm's sales force for the purpose of making sales and building customer relationships.

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Public relations

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Building good relations with the company's various publics by obtaining favorable publicity, building up a good "corporate image," and handling or heading off unfavorable rumors, stories, and events.

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Direct marketing

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Direct connections with carefully targeted individual consumers to both obtain an immediate response and cultivate lasting customer relationships.

Front 85

Integrated marketing communications (IMC)

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Carefully integrating and coordinating the company's many communications channels to deliver a clear, consistent, and compelling message about the organization and its products.

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Push strategy

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A promotion strategy that calls for using the sales force and trade promotion to push the product through channels. The producer promotes the product to channel members to induce them to carry the product and to promote it to final consumers.

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Pull strategy

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A promotion strategy that calls for spending a lot on advertising and consumer promotion to induce the final consumers to buy the product. If the pull strategy is effective, consumers will then demand the product from channel members, who will in turn demand it from producers.

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Advertising objection

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A specific communication task to be accomplished with a specific target audience during a specific period of time.

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Advertising budget

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The dollars and other resources allocated to a product or company advertising program.

Front 90

Affordable method

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Setting the promotion budget at the level management thinks the company can afford.

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Percentage-of-sales method

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Setting the promotion budget at a certain percentage of current or forecasted sales or as a percentage of the unit sales price.

Front 92

Competitive-parity method

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Setting the promotion budget to match competitors' outlays.

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Objective-and-task method

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Develping the promotion budget by (1) defining specific objectives; (2) determining the tasks that must be performed to achieve these objectives; and (3) estimating the costs of performing these tasks. The sum of these costs is the proposed promotion budget.

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Advertising strategy

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The strategy by which the company accomplishes its advertising objectives. It consists of two major elements: creating advertising messages and selecting advertising media.

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Madison & Vine

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A term that has come to represent the merging of advertising and entertainment in an effort to break through the clutter and create new avenues for reaching consumers with more engaging messages.

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Creative concept

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The compelling "big idea" that will bring the advertising message strategy to life in a distinctive and memorable way.

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Execution style

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The approach, style, tone, words, and format used for executing an advertising message.

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Advertising media

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The vehicles through which advertising messages are delivered to their intended audiences.

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Return on advertising investment

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The net return on advertising investment divided by the costs of the advertising investment.

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Advertising agency

Back 100

A marketing services firm that assists companies in planning, preparing, implementing, and evaluating all or portions of their advertising programs.